Columbus, Ga.-based payment processor TSYS is giving up on Japan after 14 years in the country.
Its issuer-processing business, which operated out of a rented data center in Okinawa, struggled thanks to the fact that many large Japanese banks process their own payments, executives said in an earnings call with analysts.
“Although Japan is a very large market, it is heavily consolidated and concentrated among a handful of institutions, almost all of which process internally,” said Troy Woods, president and chief operating officer of TSYS.
TSYS Japan Inc. was transferred to a new entity managed by former TSYS executives in the country.
TSYS also sold off its 54 percent stake in GP Net, a joint venture that provided point-of-sale services and sharing of domestic processing revenues with credit-card companies. Visa, already a minority shareholder in the venture, bought TSYS’s stake.
TSYS reported profits of $49.3 million in its first-quarter 2014 earnings release, down 13.5 percent from the same period last year. Sales, however, were up 32.1 percent to $592.8 million. In 2013, the company posted profits of $244.7 million on $2.1 billion in revenues.
Although operating margins for the first quarter were thinner than expected, executives said that would change later in the year. Mr. Tomlinson pointed to a record pipeline of accounts that would be converted to TSYS systems in the second half of 2014 as partnerships with banks like the U.K.’s Virgin Money and Western Union come on line.
Quarterly revenues excluded $16.2 million from Japan, which were classified as “discontinued operations.” The company adjusted its yearly guidance to remove an expected $70 million in revenues from Japan.
The closure of the business there was part of a reassessment of the company’s international priorities that started in 2011.
“We are deliberately continuing to close some of our least profitable lines of business as part of our continued efforts to eliminate less profitable revenue and approve our margin profile,” Mr. Woods said.
He added that the international segment had the most “moving parts” of any TSYS business unit during the quarter. Its revenues stood at $76.8 million, up 0.5 percent including positive impacts from currency conversion but down 4.6 percent on a constant-currency basis.
A breakdown of the company’s international business revealed on the earnings call showed how insignificant Japan is in the grand scheme of things. Europe makes up nearly 90 percent of the company’s overseas business, with Middle East and Africa accounting for about 5 percent and the remainder from the rest of the world.
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